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S&P launches first investible index for frontier equity markets

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Standard & Poor’s has launched the S&P/IFCG Extended Frontier 150 Index, the first fully investible index for frontier equity markets which contains the largest and most liquid stocks

Standard & Poor’s has launched the S&P/IFCG Extended Frontier 150 Index, the first fully investible index for frontier equity markets which contains the largest and most liquid stocks from more than 30 developing markets in Asia, Eastern Europe, the Balkans, the Baltic, Africa, the Middle East, Latin America and the Caribbean.

The new index will offer exposure to markets previously not considered investible by most fund managers because they are dominated by companies too small and illiquid to trade.

Constituents for the Extended Frontier 150 are drawn from countries including Bahrain, Bangladesh, Botswana, Bulgaria, Cambodia, Colombia, Cote D’Ivoire, Croatia, Ecuador, Estonia, Georgia, Ghana, Jordan, Kazakhstan, Kenya, Kuwait, Lebanon, Lithuania, Nigeria, Oman, Pakistan, Panama, Qatar, Romania, Slovenia, Sri Lanka, Tunisia, Ukraine, United Arab Emirates, Vietnam and Zimbabwe.

Standard & Poor’s believes these markets now have adequate listings and turnover, and have attracted sufficient foreign investor interest, to warrant the infrastructure necessary to sustain regular index calculations.

Alka Banerjee, vice-president of Standard & Poor’s Index Services, says the Extended Frontier 150 index is designed to meet the needs of increasingly sophisticated investors seeking to expand into markets with the potential for similar or greater returns than other, better-known developed and emerging markets.
 
‘Frontier markets represent the next chapter for alpha-seeking investors looking beyond the maturing developing economies,’ Banerjee says. ‘Accelerating economic growth, increased government focus on privatisations and heightened IPO activity is luring foreign investors to frontier equity markets.

‘These markets are less exposed to swings in the global economy and less correlated with other equity markets, providing investors with distinct diversification and risk reduction benefits at a time when global equity markets are increasingly volatile.’

The Extended Frontier 150, which draws on data from the S&P emerging markets database, has been launched with constituents from 26 countries representing an adjusted market capitalization of USD193.3bn. Colombia, Kuwait, Nigeria, the United Arab Emirates and Qatar have the highest country weightings in the new index, while Pakistan has the largest number of stocks included.

To be eligible for inclusion, companies must have a float-adjusted market capitalization of at least USD50m and a value traded of at least USD25m over the preceding six months. The index uses a modified market capitalisation scheme to ensure that no country has a weight greater than 15 per cent and no security represents more than 10 per cent of the index.

Standard & Poor’s Index Services maintains a wide variety of investible and benchmark indices including the S&P 500, an index with USD1.3trn invested and USD4.8trn benchmarked, and the S&P Global 1200, a composite index comprised of seven regional and country headline indices.

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